FRANKFURT â€" Deutsche Bank, Germany’s largest bank, said Monday that it planned to issue new stock, a move that would dilute the value of existing equity. The announcement came as the firm also said that its profit rose in the first quarter of 2013, as cost cutting offset a decline in revenue from investment banking.
Net profit rose to 1.66 billion euros ($2.16 billion), up nearly 18 percent from 1.41 billion euros a year earlier, Deutsche Bank said in announcing earnings a day earlier than previously scheduled.
The bank’s shares, however, fell after it announced that it would issue 2.8 billion euros in new shares in order to increase its capital reserves. Deutsche Bank said it would sell the new shares privately to institutional investors and that there would not be a public share issue.
Banks are under intense pressure from regulators to raise capital so they are better able to absorb shocks. Deutsche Bank has faced criticism for having too little capital compared to other banks its size.
The share sale announced Monday helps address that criticism and should make the bank more impervious to risk. But it will also increase the number of existing shares and could reduce the size of the dividend that shareholders receive.
Jürgen Fitschen and Anshu Jain, co-chief executives of the bank, said in a statement that the earnings report “reflects the strength of our franchise in the face of continued regulatory challenges, and cost efficiencies arising from our operational excellence program.â€
Since taking over the bank last year, Mr. Fitschen and Mr. Jain have promised to cut back on risk taking and address what they admitted were ethical lapses in the past. On Monday the bank said it had reduced its assets, the total amount of money at risk, to 325 billion euros at the end of the first quarter compared to 334 billion euros at the end of 2012.
Regulators as well as investors have pushed banks to reduce risky investments and raise capital, which should help prevent future financial crises. But as banks become safer, they are also likely to become less profitable.
“Banking has to become boring again,†Rüdiger Filbry, director of the German banking practice at Boston Consuling Group, said during a meeting with reporters Monday, referring to the industry in general. “We expect significantly lower profits than we have seen in the past.â€
Deutsche Bank said revenue in the first three months of this year was nearly flat, rising 2 percent to 9.4 billion euros. In the investment banking division, often the largest source of earnings, profit fell 2 percent to 1.85 billion euros.
Much of the increase in profit came from cost cutting. Deutsche Bank said it cut expenses not including interest by 370 million euros, to 6.6 billion euros.
